US-headquartered ecommerce company Amazon has found itself in a legal tussle after Delhi-headquartered health and wellness product provider Modicare took the company to court for selling its products “illegally”.
In its order dated February 5, 2019, the Delhi High Court has ordered Amazon sellers— M/s. Laxmi Enterprises and M/s. Modicare DP Store — to stop selling, advertising, offering for sale or displaying Modicare products on Amazon India store.
Modicare Ltd in its application submitted to the Delhi High Court said that on Amazon.in, two of the sellers— M/s. Laxmi Enterprises and M/s. Modicare DP Store— are selling its products in violation of its direct selling guidelines by “indulging in unfair competition”.
The company claims that its products are sold via a door-to-door network of consultants, dealers and distributors, directly to consumers under the Direct Selling Guidelines, issued by the Department of Consumer Affairs. Modicare is owned by New Delhi businessman Samir Modi who is also the founder of Colorbar cosmetics range and Twenty Four Seven chain of convenience stores.
To this, Amazon has defended that it is an intermediary as defined under the IT Act and in any event, “even if Amazon is handling the packaging, transportation and delivery of the goods, the safe harbour provisions under Section 79 of the IT Act continues to apply to Amazon.”
In March 2017, India Direct Selling Association (IDSA) wrote to players such as Amazon India, Flipkart, Snapdeal, Shopclues and Paytm, seeking action to stop unauthorised sale of products from member companies.
This included the sale of products from Amway, Oriflame, Avon Beauty Products, Herbalife International, Modicare and Tupperware, on their platforms.
Modicare has claimed that it first wrote to Amazon on January 13, 2017, to which it said it is an intermediary. To this, Amazon has contested that it has binding proof that Modicare was aware of these products being sold since 2016 and therefore, the court should not grant an ad-interim injunction. It also emphasised that Modicare hasn’t filed for infringement of trademarks and therefore, it “lacks any statutory backing.”
Some of the issues Modicare has with Amazon’s selling products include products being shown as being “by Modicare”, alteration of price, various defects in the products, and warranties being changed.
The court in its order has directed the sellers to take down the product with immediate effect, and at least within 48 hours from the order. However, Inc42 noted that various products being “sold by Modicare” are still available on Amazon.
The court has also directed Amazon to take “requisite steps” if the sellers are not identified as actual distributors of Modicare products within four weeks. The matter has been listed for next hearing on March 5, 2019.
The fake goods complaints have become a norm in the booming ecommerce market of India. A survey by LocalCircles in November 2018 found that 19% of the respondents had received fake products from ecommerce companies in the last six months.